Improved coal criteria

30.11.2018

Exclusion of companies connected to coal, coal mining and coal power

Background

With the high CO2 emissions associated with the combustion of coal, it is necessary that the world turn to more sustainable
energies. Due to health impacts, stricter regulations, demands for increased energy efficiency, decentralization of energy
production and increasing competition from newer and cleaner sources of energy make, the future prospects of companies involved
in the coal industry are not positive.

Storebrand was an early mover, and began its coal divestment program in 2013. Five years ago, Storebrand decided to exclude
all coal mining and power companies that had more than 30 percent in revenue from coal activity, from our portfolios. The
companies that remained were companies considered to have a credible plan to reduce their share of revenues from coal and/or
increase revenues from renewable energy. If the change is not happening fast enough or going in the wrong direction, Storebrand
will divest.

Coal exit strategy 2018-2026

To be in line with the recommendations of the latest IPCC report, Storebrand has developed a strategy to divest from coal
at a faster rate than it is currently doing. The IPCC has analyzed various pathways, all of which require a near-total reduction
in coal use for electricity generation by 2050, with reductions of approximately two-thirds by 2030.

In the period between 2013-2018, Storebrand excluded companies that derive more than 30 % of their revenue from coal. The
exit strategy which was launched in December 2018, involves a reduction of this threshold by 5 % every second year (25% in
2018, 20 % in 2020 and so on). Under the new criteria, Storebrand will effectively divest from coal investments by 2026. The
ambition is also to collaborate with other investors. A gradual transition allows more investors to join the movement and
sends a strong message and warning to the coal industry around the world.

Our existing coal criteria is based on data from Trucost – on revenue from coal fired power. For companies that produce power,
and also distributes that power to end-users – one could discuss whether the resulting revenue could be ascribed to distribution
or production. Our method calculates the sum of all revenue connected to power related activities (generation and distribution)
and then multiplies this with the percentage of the power mix the company generates from coal. In essence, this should capture
uncertainties of whether revenue comes from distribution or production of coal fired power. If a large part of the power being
generated is from coal – and substantial revenues from distribution – one could assume that this is from coal fired power.

We also exclude any company with plans of building new coal fired power plants. The limit has been set to 1000MW of capacity
under construction which commits us to excluding companies that move into the construction phase in the future.

Currently, in november 2018, 57 companies are excluded from the investment universe.